They will allow patients to buy anything that their local healthcare service deems a good use of NHS resources, including private and national health service treatments, and alternative therapies.

Announcing the pilot projects, included as part of the new Health Bill, Alan Johnson, the Health Secretary, said that they would help to "drive up" quality of care.

He said: "People rightly have high expectations of the care the NHS offers, and they want more control over their own health - which is why this Bill will give more power to patients and drive up the quality of care."

But others warned that the scheme could carry substantial "risks".

Steve Barnett, chief executive of the NHS Confederation, which represents health service managers, said that while he welcomed the plans that there were "significant barriers" to its implementation.

"Should patients be allowed to spend their personal budgets on non cost-effective treatments?" he said.

"Should individuals be allowed to top-up their care? Should patients be allowed to invest personal budgets to be spent at a later date?.

"Personal health budgets could revolutionise the way in which care is delivered, but they are not without risks."

Niall Dickson, from the King's Fund, warned that allocating the budgets would not be "straightforward".

"Getting the initial payment level right will be important as will deciding what restrictions to place on the kind of treatment a patient is allowed to purchase with tax payers' money, and from whom," he said.

Treatments will have to adhere to guidelines set by ministers, but could include alternative therapies such as acupuncture and reiki.

Under the proposals, patients will have to agree with their Primary Care Trust (PCT) before buying treatments.

Although patients will be given the money directly there will be safeguards to ensure that the cash is not spent on unapproved treatments.

These could include that payments will only be made into a separate bank account created for the purpose, the Department of Health said.

Ministers hope that the pilots will begin this summer, with a view to rolling the scheme out nationally in around three years.

The Conservatives and the Liberal Democrats have previously advocated individual budgets to give patients more control over their health treatment.

Andrew Lansley, the shadow health secretary, said: “Patients need to have more say over their care. We are glad that Labour are finally following our lead on personal budgets.

“But it’s disappointing that Labour have dithered and delayed over this proposal. Personal budgets have been at pilot stage since 2005. If Labour had stuck to their promises to deliver them then patients would already be benefiting”.

Dr Hamish Meldrum, the chairman of the British Medical Association, said: “It is currently very unclear how such a system would work in practice, for example what would happen when a patient’s budget ran out.

“Moreover, this policy seems to further establish the idea of healthcare as a commodity, which the BMA does not believe is in patients’ best interests.”

The Bill also includes measures to ban the display of tobacco products as well as an outline for the proposed NHS constitution, designed to provide a "bill of rights and responsibilities" for patients.